Step-Up SIP can help you attain your financial objectives faster
Saving money and reaching your financial goals is of utmost importance nowadays, and one of the many ways to do that is through a Systematic Investment Plan (SIP) in Mutual Funds. It's a method where you invest a fixed amount regularly in mutual funds. But did you know that increasing your SIP amount every year can help you reach your financial goals even faster. Let’s see how.
Suppose you are beginning a 20,000 SIP per month for the next 15 years. In 15 years, if your investments grow at an average rate of 11%, you will have a corpus of between 92 and 93 lakh rupees. You will maintain your monthly SIP at 20,000 in this scenario.
Now think about raising your SIP contribution by 10% annually. You will have a significantly larger 1.59 crore in this situation! In the second situation, you undoubtedly would have invested more as well. But the reason for it is that you raised your assets when your income did as well.
So that's how a modest increase in monthly SIPs each year can actually alter the course of events and hasten the growth of your wealth.
Additionally, if you combine this growth with recurrent lump sum investments made during bear markets, your overall returns and long-term wealth creation will be significantly accelerated.
And although we used 10% as an example to increase the SIP every year, it is not required to do so. You can also opt for smaller increases, like 5%. Nothing is insignificant, and something is always preferable to nothing.
There is no wrong in saying that all markets go through ups and downs, however by increasing your SIP amount during periods of market growth, you can take benefit of the rising market. You can purchase more units at greater costs when you invest more in a market that is expanding. Your investment's value rises as the market rises, bringing bigger returns and hastening the achievement of your goals. But nevertheless, if invest in a down market will give you good results in long term. Many have questions like why to increase or how to increase, let's check the below important points to answer your queries.
1. Make the Most of Compounding:
When you increase your SIP amount each year, you take advantage of something called compounding. It means that your investment not only grows but the returns you earn are reinvested to generate even more returns. By putting more money into your SIP every year, your investment grows faster, and you get closer to your financial goals sooner.
2. Beat Inflation:
Inflation is when the prices of things increase over time, making your money worth less. By increasing your SIP amount annually, you can keep up with inflation. When you invest more each year, your money has a better chance of growing faster than the rising prices, ensuring that you reach your goals with enough purchasing power.
3. Match Your Growing Income:
As your income increases over time, it makes sense to invest more too. By increasing your SIP amount every year, you are aligning your investments with your rising income. Through this way, you're not only beating inflation but also taking advantage of your ability to save and invest more.
4. Avoid Lifestyle Creep:
When your income increases, generally people start spending more on a fancier lifestyle. However, by committing to increasing your SIP each year, you prioritize saving and investing. This helps you to avoid spending all your extra or additional income and instead put it towards your financial goals. Sticking to this discipline allows you to make progress faster.
5. Develop Good Saving Habits:
Increasing your SIP every year helps you to develop a habit of saving and investing regularly. It becomes a routine where you set aside a portion of your income for investment. While passing time, this habit becomes second nature, making it easier to stay committed to your financial goals and thereby maintain the pace towards achieving them.
In conclusion, raising your SIP contribution each year might speed up your progress towards your financial objectives. It takes advantage of compounding, helps beat inflation, matches your growing income, prevents lifestyle creep, develops good saving habits, and lets you benefit from market growth. By following the above points, you will be on your road to achieving your financial goals sooner. Links for Opening Free Account in FundzBazar for Investments in Mutual Funds: Mobile Application Link: https://fundzbazar.com/Link/errdtX270W0 Website Link: https://fundzbazar.com/Link/KnMtSfLW13k DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in the stock market is subject to unpredictable market-related risks. The author has no plans to invest in this offer and also the author does not recommend investing in any offer published on this website.